Copyright maltatoday
Clyde Caruana had a clear target in mind when delivering Budget 2026—families with children. The finance minister delivered on his promise to give these families a significant tax cut. Spread over three years, the adjustment in tax brackets for parents will leave them with more money in their pockets to meet the financial demands of raising children. The income tax measure will leave €160 million in people’s pockets over the next three years—a significant and ostensibly unprecedented boost to thousands of families with children. Suffice to say that for individuals with two or more children, who pay tax at the parent rate, the tax-free portion of their income will go up to a whopping €30,000 by 2028. This represents a massive breather, which will go a long way to support these families. And for those who earn below the €30,000 threshold, the Children’s Allowance will increase by €250 per child. The baby bonus that is paid out on the birth of a child will also increase to €1,000 for the first child from the current €500. There will be higher bonuses for those having a second child and more. In his speech, Caruana said the government was adopting a political approach that “defines what type of country we want to leave our children”. He underscored the challenge posed by the low fertility rate, insisting the government will not fear taking the “courageous decisions” to tackle the biggest challenges of the future. The delivery of a second massive tax cut one year after cutting income tax across the board, is a courageous move indeed within the context of global economic challenges. Undoubtedly, the tax cut for parents and other measures targeting children and youths have an immediate impact—they alleviate the burden for those in the middle class who already have children. They are measures that try to address the demographic challenges Malta is facing. However, whether these fiscal benefits will be enough to encourage more people to have children remains to be seen. The measures will undoubtedly fall in the positive column when couples sit down to plan their future as a family but a more holistic approach is needed to make Malta a more child-friendly society. Having enough income is just one part of the equation, albeit an important one. Having an adequate work-life balance is another major issue for prospective parents and addressing this will require bolder social and economic measures. Having 12 months of paid parental leave for each of the couple upon the birth of a child; workplaces that are incentivised to champion flexibility; free childcare centres with more flexible hours; a shorter work week; more open spaces closer to home; safer, liveable communities… these are just a few of the measures that could go a long way in creating a country where having a child becomes an easier choice to make. Budget 2026 sets the right tone but if the fertility issue is to be addressed concretely, the changes cannot stop at the fiscal level. What is required is a change in lifestyle, something that takes its time to evolve and depends on the aspirations and expectations people have. But achieving this step change requires more than just a government that offers support through fiscal incentives and measures. It also requires employers to play ball; to understand that productivity can improve if workers are happy with their lives. Budget 2026 must not be viewed as the be all and end all; it needs to be part of a medium-term plan to improve the quality of life and create a work-life balance that is sustainable across the board.
